The following is an outline of a recent case involving a company based in Southern Ontario . The company details have been altered somewhat to protect the identity of our client.
- Ontario based company
- Kitchen and bathroom fixture manufacturer
- Annual Revenue – approximately $10,000,000 CAD
- Employees – 75
- U.S. Sales – Not significant, but growth is planned,
- Product includes cabinets and fixtures for kitchen and bath.
- Installations are also provided, often through subcontractors.
- The company is solid financially.
The Project (brief outline only)
- Audit Existing Insurance Policies
- Review for errors, omissions and accuracy
- Analyze coverages, definitions, conditions, terms and exclusions.
- Provide explanation of existing scope of coverage.
- Identify potential pitfalls, deficiencies and problems.
- Recommendations on possible enhancements, additional coverages, coverages not required and retention levels.
- Analysis of operations, assets and income exposures
- Determination of Essential Insurance Needs
- Review various contracts for potential liabilities
- Preparation of Insurance Specifications, and information package for possible tendering.
- Provide Written Report
The Details (sample elements from interim report)
- Property Insurance rates have been fairly steady the past few years. The client has only ever had one insurance claim, rather small.
- Liability Insurance rates had increased 43% in the same period.
- Various coverages were underinsured, exposing the company to potential insurance penalties, and erosion of .corporate assets, in the event of a claim.
- The amounts of protection had not kept pace with recent acquisitions, expansion and increases in replacement cost.
- Business Interruption was not in place for this company, exposing them to considerable financial hardship.
- There was no provision in the policy to pay non key employees in the event of a revenue abatement or reduction.
- Serious coverage gaps existed in areas such as Product Recall, and Directors & Officers Liability Insurance and Environmental Impairment
The Results (a few examples)
- Insurance coverages were negotiated to fill the holes that were uncovered.
- Values were updated to avoid penalties.
- Self Insured Limit was increased to realistic level, and reduced insurance pricing utilized to offset updated amounts of protection.
- Coverages were deleted where the potential for loss was low, or presented minimal exposure.
- Products Recall, Directors and Officers Liability Insurance, Environmental Impairment and other coverages previously omitted were explored.
- Various policy definitions were amended by the insurer to reflect the client’s needs, i.e. old and obsolete equipment that couldn’t be replaced, but was still functional was now insured under a modified replacement cost clause, to avoid imposition of terms that were unreasonable.
- All policies were amended to have concurrent dates, in sync with the fiscal period for ease of administration.
The Followup (The start of a well managed program)
- A Risk Management Manual is being prepared for the client, to assist in providing better control of insurance details including records maintenance.
- Preparation for tendering of the insurance program has begun.
- Quarterly meetings have been scheduled to maintain up to date awareness of the client’s operations and changes.
- Periodic attendance in management and planning meetings has been arranged, so that risk management and insurance implications can become an integral part of the planning and management of company affairs.
- Employees – 150
- U.S.. Sales – Small, but growth is planned
- Product Line includes some integral auto components